Financial markets

Demography

The vanishing workforce

HAVING argued last year that demography is the key factor in the pensions issue, I'm struck at how relatively little attention is paid to the issue with regard to long-term economic prospects. Basically, economic growth comes from having more workers, making them more productive or a combination of the two. If a country has fewer workers, productivity has to do all the work, and even then real growth is likely to be slow.

So a hat tip to Edward Bonham-Carter of Jupiter who passed on a chart (from Bank of America Merrill Lynch) showing the expected change in working age population between 2010 and 2035. The chart (now reproduced here, sorry for the delay) shows that the following nations are all set to see declines of more than 10%; Switzerland, the Netherlands, Austria, Hungary, Italy, Portugal, Poland, South Korea, Russia, Japan and Germany. In the last two cases, the decline is set to be a remarkable 20%.

The US is likely to show a rise of almost 10%; Britain a more modest increase. The top five growers are the Philippines, Egypt, Malaysia, Israel and india. Of course, very-rapidly growing population can be a problem, especially if you can't find jobs for young men. But it is better to be in the top half of the table - like Australia, New Zealand and Ireland - than the bottom.

These figures are quite remarkable - not since the Black Death can there have been such a fall in workers - and the implications must surely be very profound. One reason it will be so hard for Europe to grow its way out of the debt crisis is the impact of demography.

MindTheEmploymentGap was close to the mark when he said... 'The workforce is bigger than you may want to believe'... There are unemployment rates over 20% across wide swathes of the industrialised world... So it's really a question of MOTIVATING the workforce... And the motivation of labour is a MANAGEMENT function

We have such a dysfunctional management class... That's why we have a 'labour shortage'... Management loves cheating... They love pulling fast ones over honest working men... Management would rather employ women and coloured immigrants anyday... They need more supervision... More power to management!

Some honest ground rules would help... the most obvious being priority for breadwinners with homemaker spouses and families to support (yawn!)

And the rise in the price of housing should be noted here... It is so pointless working when you cannot hope for a decent home and family... Somehow we have to bring decent homes and family life within the reach of ordinary working men, supported by their women in ancillary roles... and subsidised housing

The media are so committed to Feminism... They cannot let go of that stupid notion... And they will drag us all down with them... Media vanity is a factor in the equation

The solution is so readily available... Subsidise single-income marriages... And cut off support to working couples... A homemaker allowance should do the trick... But it runs counter to everything the media have said this last forty years... and continue to say

I agree, and I think Buttonwood should be responding to this. Why is GDP so important, as opposed to GDP per capita? Or does Buttonwood consider the current debt situations so significant that GDP growth is necessary for that reason?

poland is fine. if you won't stop criticising poland, a fascist party PiS may win with current ruling PO. STOP DOING IT! OPPOSING PARTY IS A THREAT TO DEMOCRACY! ONLY CURRENLTY RULING PARTY ENSURES PURE DEMOCRACY! everything is fine in POland, do not write about it!
CARRY ON

Thanks for the article. It is sobering thought on Poland's demography. It is funny that nothing of a long term to counter the negative trend in Poland's demography is even entertained by the government of the day. The current prime minister is happy that some of the economic problems such as pensions may go away with the decrease of the population from 38 to 32 million. This sounds incredible, doesn't it? But it certainly goes along the political correctness lines in EU where on one hand a traditional multi children families deserve no support (an exception is France which has had it for the long time) and on the other hand looking for the solution to immigration from outside of EU (Sweden e.g. in program of Vänster Partiet). Well, good luck if one think that immigrants in large numbers from culturally different lands ever integrate with the host country culture. Keep kidding yourself.

Now, I know why Germans so eager to attract millions more 'productive' immigrants, especially from the emerging countries. Its extremely serious, for countries that also lack moral and ethical foothold. Most of the europeans countries has seen a degradation of values as well as nullifying the concept of marriage and 'being together' and structuring a family. Demographics, just gives the broad of how bad things can be. Further, peep in the Education , income, and confidence levels will show that it cant get worst than this. So , finally, will the westerners agree, they need to get back the concept of marriage and staying together in place.

Can I go to sleep now? The Middle since 1950s is giving ME a headache and NOW I know why, Assad Assad Assad all the time guns, reporters shot, what a mess this issue has created. We all nearly, with subject of Iran nukes are having nightmares and eyes on TV net, are red.We are asking the dumb question ther were no WD are we going for the 3rd WW I thank you Firozali A.Mulla DBA

mnay muslim nations have dropped ferttly rates as well. Sauadi Arbia has dropped from6.3 to 2.31 children per women in just 11 years. Tunsia is below replcament, as well as iran. Algeria has been below replacemnet since 2004. More countreis are getting on the band wagon. Swaziland land in Arica has dropped from 5.87 to 3.31 children per women in ten years.
many of these countries are smart enough to know that large and unemployed population of young people is the stuff of revolutions

great then they would have support their young, take women out of the labor force, pay for schools etc at the same time they will have large elderly population. It would be the opposite of an demogrpahic divended. They would be squeezed from the top and bottom. Plus it would take 18-20years to for thses kid t start showing up on the labor force.
Bothe countries need ti import labor, and both have. The can fill their needs immediatly. The workers can be on temp visas so if oversupply occurs they can ship them home

thi article assumes that fertilty rates will remain the same, my guess is fertt;ily rates will plunge in those countries were a middleclass has started to form. Lokk at south Korea, their fertily plunged by over 5 persons per women in less than 50 years. My guess is mexico fertily rate will plunge as the middleclass starts to take hold, i could see it well under 2 by 2020.

Smart people with kids cant do much to retool. People like me are basically doomed. Choose - retool and be a bad parent, or be a good parent but go hungry, cant afford decent schools and in the end be a bad parent. Society is eating itself alive.

Libya and Tunsias birthrates have both dropped below replacemnt levels, as well as Irans. Many of the muslim countries are seeing a decling fertilty rate. turkey ferttly rate wass below replacement and now is just above replacement. Even pakistan has dropped from 4.56 per women to 3.1 in ten years.
I predict ferttly rateswill continue to plunge around the world.
Many south American countries are either at or approaching replacemnet.

Population growth is not something that policymakers should be encouraging. In fact, GDP growth is not something that people should want to increase necessarily. Countries should increase standards of living, and once they are at a good level, then they should focus on lowering their environmental footprints.

The fact that population growth is bad for the environment and the economy too in the long run is well documented. Aging populations produce problems too, but they are short term and solvable. People should save money for their own retirements and keep working longer without expecting younger people to subsidize them. Rich countries should allow immigration to compensate for a lowering population, but natural population increase is a bad thing, not a good thing.

If any economy relies on growth of population or even GDP, then that is not sustainable.

There is research that directly relates birth rate to conflict. One of my favorites is about Cyprus. It shows a solid correlation between declining birth rates, fewer young men and less conflict. (We can see the opposite with a place like Gaza and some other conflict areas around the globe: high birth rates, high conflict.) This area also, of course, relates to Steve Levitt's now famous research about how abortion has cut the crime rate by reducing the quantity of unwanted young men with poor prospects.